Corn Roars On '09 Acreage Projections

Published on: 16:58PM Dec 12, 2008
Dec Corn
359 ½
+21 ½
Mar 09 Corn
373 ½
Jan Beans
-2 ½
Mar 09 Beans
856 ¼
-4 ¼
Dec 08 Wheat
506 ¾
+15 ½
Mar 09 Wheat
+5 ½
Dec KC Wheat
530 ¼
+8 ¾
Dec Min Wheat
-20 ½
Dec Meal
Dec Bean Oil
Corn prices roared higher after industry analysts Informa released its US acreage estimates for 2009 that featured an aggressive slash in corn acres and a substantial jump in US bean acreage. The numbers we heard from market sources were:
2009 (est)
82.288 million
85.889 m
81.445 m
75.878 m
Winter Wheat
44.080 m
46.181 m
We’re amazed at how aggressively the market reacted to this news, as no company, individual or organization – especially the consistently-wrong Informa – knows what acreage allocations will be made 3-4 months from now. And Informa seems to be working off historical fertilizer costs etc, and projecting those costs onto future decisions. But that is just plain wrong and highly misleading. Fertilizer prices are already slipping fast, and if they continue to fall as many market watchers expect, corn will become increasingly attractive to a huge number of farmers, especially in conjunction with the increased availability of triple-stack seeds for 2009. Further, we still have the key phase of the South American growing season ahead, which will have plenty to say about the total availability – and global price – of soybeans as we roll into the spring of 2009.
In short, we think it is absurd to expect such a steep decline in corn acreage at this juncture.
Still, Informa has stuck its neck out, and now it’s up to the market to decide whether what they’ve said holds water. We think corn’s demand prospects remain tough at best (weak ethanol demand, declining meat consumption, strong competition from an abundance of feed-quality wheat in Europe) and so feel prices are already approaching the upper reaches of their likely trading range for the near to medium term. With that in mind, we strongly recommend that producers use the current corn price strength to top up 2008 sales and also bump up 2009 sales.
Soybeans, meanwhile, remain underpinned by solid consumer interest and a patchy production outlook in Brazil and Argentina, so we are looking for that market to stabilize and then edge higher over the coming weeks. Wheat, meanwhile, remains burdened by a swelling global stockpile, so rallies will continue to be sold into by traders and natural longs alike.
In all, we view today’s moves in corn as an overreaction by a jittery, thin market, and that corn will in due course grind lower again. So, once more, please consider using the current prices as a chance to conduct additional sales. If you genuinely believe prices will continue to head higher, we can help you use upcoming price dips to cover sales with cheap calls that will allow you to fully participate in any futures price rally even after you have sold your cash corn at a decent price.
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